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The many competing schools of thought concerning themselves with industrial clusters have at
least one thing in common: they all agree that clusters are real life phenomena characterized by
the co-localization of separate economic entities, which are in some sense related, but not joined
together by any common ownership or management. So hierarchies they are certainly not.
Yet, it is usually taken for granted that clusters, almost regardless of how they are defined, all
expatriate the 'swollen middle' of various hybrid 'forms of long-term contracting, reciprocal
trading, regulation, franchising and the like' residing somewhere between hierarchies and
markets. This fundamental (but usually implicit) assumption would, perhaps, be justified if
markets could be reduced to events of exchange of property rights, between large numbers of
price-taking anonymous buyers and sellers supplied with perfect information as they are
commonly conceived in mainstream economics. One of the original attractions of Neoclassical
price theory was precisely that it promised a way of analysing the economy in general and
market exchange in particular independently of specific institutional settings.
However, introducing transaction costs as more than fees paid to intermediaries leads inevitably
to comparative institutional analysis and, not to be forgotten, to the perception of markets as
institutions with specific characteristics of their own. Some sets of characteristics are so common
that they represent a specific market organization or market form. The cluster is one such
specific market organization that is structured along territorial lines because this enables the
building of a set of institutions that are helpful in conducting certain kinds of economic
activities.

This paper addresses an issue of great importance for the future organization of the consumer
electronics industry: the "battle" of control over component-based digitization. We are now
witnessing the dismantling of the Japanese Model that has prevailed in consumer electronics
over the past 30 years. Specialized and large-scale component suppliers have taken the lead in
most component-based innovations and have obtained increasingly powerful positions in the
value chain of consumer electronics. This paper provides an in-depth study of the strategic and
structural ramifications of one such component-based innovation, the current transformation of
sound amplification from conventional to digital amplifiers. We study the early formation of this
new technology as especially reflected in the particularly dynamic cluster of innovation in
Denmark and extend the analysis to the global strategizing around this new technology. A
framework is developed to explain the reluctance of most of the large consumer electronics
giants in developing/adopting this new technology.
Key words: Consumer electronics, Industrial dynamics, Open Innovation
JEL Codes: L6, L68, O32

The paper investigates the relationship between human capital characteristics and firm performance
in engineering consulting. Because general experience, firm-specific human capital and diversity
carry specific costs and benefits we hypothesize curvilinear (taking inverted U-shapes) relations to
firm performance. We find little effect of general experience and firm-specific human capital, but
the findings give some support for the curvilinear relation between performance and human capital
diversity.

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While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use measures of economic freedom from the Economic Freedom of the World database to examine which elements of economic policy making and the institutional framework are responsible for the supply of entrepreneurship Our data on entrepreneurship are derived from the Global Entrepreneurship Monitor. The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.

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I critically discuss recent claims about economic organization in the emerging
“knowledge economy,” specifically that authority relations will tend to disappear
(or at least become radically transformed), the boundaries of the firm will blur,
and coordination mechanisms will be much more malleable than assumed in
organizational economics, resulting in various “new organizational forms.” In
particular, the price mechanism will be used inside hierarchies to a much greater
extent. In order to obtain an analytical focus on the knowledge economy, I
assume that it may be approximated by “Hayekian settings” (after Hayek 1945),
that is, settings in which knowledge is distributed and where knowledge inputs
are relatively more important in production than physical capital inputs. I then
argue, drawing on organizational economics as well as Mises’ insights in
property rights and comparative systems, that the presence of Hayekian settings
does not mean that authority will disappear, etc., although economic
organization will in fact be affected by the emergence of the knowledge
economy. This suggests that Austrian economics has an important contribution
to make to the study of economic organization.

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Comparing inter-firm labor mobility in the music industry and manufacturing industries

Frederiksen, Lars; Sedita, Silvia Rita(Frederiksberg, 2005)

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Abstract:

This paper adds new knowledge to the phenomenon of transferring embodied knowledge through
labor mobility by means of a comparative study of the entertainment and manufacturing industries.
Explorative in nature, the paper takes advantage of unique data on the Danish labor market (i.e.
IDA) to investigate labor mobility patterns for the two selected industries and to detect internal
differences within industry segments and regarding creative intensive and invention activities in
particular. We use the music industry as a proxy for the entertainment industries.

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The “knowledge governance approach” is characterized as a distinctive, emerging approach that cuts across the fields of knowledge management, organisation studies, strategy, and human resource management. Knowledge governance is taken up with how the deployment of governance mechanisms influences knowledge processes, such as sharing, retaining and creating knowledge. It insists on clear micro (behavioural) foundations, adopts an economizing perspective, and examines the links between knowledge-based units of analysis with diverse characteristics and governance mechanisms with diverse capabilities of handling these transactions. Research issues that the knowledge governance approach illuminates are sketched.

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Although they have developed very much in isolation from each other, we argue the theory of
entrepreneurship and the economic theory of the firm are closely related, and each has much to
learn from the other. In particular, the notion of entrepreneurship as judgment associated with
Frank Knight and some Austrian school economists aligns naturally with the theory of the firm.
In this perspective, the entrepreneur needs a firm, that is, a set of alienable assets he controls, to
carry out his function. We further show how this notion of judgment adds to the key themes in
the modern theory of the firm (i.e., the existence, boundaries, and internal organization). In our
approach, resource uses are not data, but are created as entrepreneurs envision new ways of
using assets to produce goods. The entrepreneur’s decision problem is aggravated by the fact
that capital assets are heterogeneous. Asset ownership facilitates experimenting
entrepreneurship: Acquiring a bundle of property rights is a low cost means of carrying out
commercial experimentation. In this approach, the existence of the firm may be understood in
terms of limits to the market for judgment relating to novel uses of heterogeneous assets; and the
boundaries of the firm, as well as aspects of internal organization, may be understood as being
responsive to entrepreneurial processes of experimentation.
Key words: Entrepreneurship, heterogeneous assets, judgment, ownership, firm boundaries,
internal organization.
JEL Codes: B53, D23, L2